Navistar drives out of venture with M&M

Mahindra and Mahindra (M&M), the country’s biggest tractor maker, has announced plans to buy out Navistar group’s stake in Mahindra Navistar Automotive Ltd (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL), the two truck joint ventures, for Rs175 crore.
Following the stake buy, both MNAL and MNEPL will become wholly owned subsidiaries of Mahindra, the Indian company said in a statement.

It said that the sale required regulatory approval in India and the process is expected to be completed next year.

The agreement allows Navistar to continue sourcing components from India, while Mahindra would continue to provide engineering services to Navistar. Navistar Group would continue to support M&M through a license agreement.

“M&M is committed to the success of the truck business. We acknowledge the contribution made by Navistar to this venture,” said Pawan Goenka, president, automotive and farm equipment sectors, M&M.

The joint venture (JV) between M&M and Navistar continues to see losses. The truck JV has been operating at very low utilisation levels as the truck market remains incredibly hard to break into for new players.

As a result, the two JVs (assembly and engine) made a loss of Rs370 crore last fiscal, bigger than the Rs240 crore loss in the previous one.

“While the Indian market has not expanded as we had originally expected and industry challenges there continue in the near term, we still see promise in India, going forward. But given Navistar’s 2013 priorities, our capital and focus needs to be allocated to other business opportunities in the near term,” said Troy Clarke, president and chief operating officer, Navistar.

Navistar and M&M formed the joint venture in late 2005 to manufacture trucks and buses in India, source components and provide engineering services for the design and development of Navistar vehicle products. The MNEPL joint venture was formed in 2007 and began producing engines in 2010.